The ATO has updated its independence standards guidelines for SMSF auditors, defining how an objective review of operations can be carried out to ensure compliance with the current version of APES 110.
To this end, the regulator has enhanced its digital guide covering this issue, first published in mid-March, by adding new information to the “Applying appropriate safeguards” section called “Appropriate reviewer requirements”.
In particular, it has now specified the meaning of an ‘appropriate reviewer’ and the importance of having them provide an objective review.
Further, it has outlined how an independent reviewer can use a sampling approach to situations where an SMSF auditor’s independence is unclear because their firm generates a large proportion of its fees from one referral source.
The ATO has also indicated the evidence it expects to see documented on the audit file of the reviewer.
The new guidelines are to provide greater clarity regarding one of the safeguards available to SMSF practitioners to ensure their activities are complying with the amended auditors independence standards, that being to have an appropriate reviewer who was not involved in providing the service review, the audit work or service performed.
In addition, the ATO has reminded SMSF auditors to check the disqualified trustees register when determining whether an auditor contravention report (ACR) is necessary.
The regulator’s records have indicated some practitioners have failed to lodge an ACR as required under section 126K of the Superannuation Industry (Supervision) (SIS) Act 1993 despite an individual being recorded on the register.
Auditors have been advised under section 126K of the SIS Act an individual will be considered to have breached the law if they act as a trustee, director or corporate trustee of an SMSF while they are a disqualified person, or if they are an SMSF trustee and fail to alert the ATO immediately in writing if they are or become a disqualified person.
The additional requirement for auditors to notify the trustee(s) of the contravention in writing and modify Part B of the SMSF independent auditor’s report was also pointed out.
The ATO recommended SMSF auditors check the disqualified trustees register annually via its website.